New Zealand Income Tax Codes and Rates Explained

A plain-language guide to choosing the right tax code, understanding NZ's progressive brackets, and knowing what actually lands in your bank account.

Your tax code tells your employer how much to deduct from each pay. Getting it right means your take-home pay is predictable and your tax position stays square with Inland Revenue throughout the year. Getting it wrong means either an unexpected bill at year-end or months of overpayment you could have put to better use. In our experience advising New Zealand households, incorrect tax codes are one of the most common and easily avoidable payroll errors we see.

The code itself is a short letter combination on the IR 330 form you complete when starting a new job, picking up a second role, or beginning to receive a benefit or pension. It reflects your circumstances: whether the income is your primary or secondary source, whether you carry a student loan, and whether you qualify for the Independent Earner Tax Credit. The IRD uses this to apply the correct withholding rate so your tax is settled progressively throughout the year rather than in a lump sum.

If you are unsure which code applies, the IRD provides a short online questionnaire to guide you through it.

Primary Tax Codes

Most New Zealanders use one of the following codes for their main source of income:

• ‍M is the default for a single job or primary income source. It applies the standard progressive tax rates based on your total annual earnings.‍
• ME applies if your annual income falls between $24,000 and $70,000 and you are not receiving Working for Families Tax Credits, a main benefit, NZ Superannuation, or an overseas equivalent. The ME code builds the Independent Earner Tax Credit (IETC) into your regular pay, delivering up to $520 per year across your pay cycles rather than as a year-end refund. Many eligible workers miss this simply because they select M instead.‍
• M SL is used when your primary income is salary or wages and you carry a student loan. The "SL" suffix ensures compulsory repayments (currently 12% of every dollar above the repayment threshold) are deducted alongside income tax. If you omit the SL component, repayments will not be withheld and the shortfall will appear as a debt at year-end.‍
• ME SL combines both: the Independent Earner Tax Credit and student loan repayments in a single code.

Secondary Tax Codes

If you earn income from more than one source at the same time, your second (and any subsequent) employer must deduct tax using a secondary code. Each secondary code applies a flat withholding rate aligned to the marginal tax band your combined income is expected to fall within. The purpose is to approximate the correct total tax across all your income sources, because your primary code alone cannot account for earnings from other jobs. The main secondary codes are:

• ‍S applies when combined annual income from all sources is $15,600 or less.‍
• SH applies when combined income sits between $53,501 and $78,100. This is one of the most commonly used secondary codes for people with a weekend or part-time role alongside full-time work.‍
• ST applies when combined income is between $78,101 and $180,000.‍
• SA applies when combined income exceeds $180,000.

The correct secondary code depends on your total expected income from all sources, not the amount from the second job alone. If your main job pays $55,000 and your weekend work adds $12,000, combined income is $67,000, placing you in the SH bracket for the secondary role.

Each secondary code also has an SL variant (S SL, SH SL, ST SL, SA SL) for those with a student loan.

Getting the secondary code wrong is the single most common reason New Zealanders end up with an unexpected tax bill. If your circumstances change mid-year through a pay rise, new role, or shift to part-time hours, update your code via a new IR 330. The IRD's online tool walks through the decision in a few minutes.

Other Codes Worth Knowing

SB applies to secondary income from a business, freelance work, or a side hustle. If you earn income outside PAYE employment alongside your main job, this is typically the relevant code.

WT is for schedular payments, a category covering contractors in specific industries such as entertainment, sales commissions, and certain professional services. Schedular payment tax codes are declared via the IR330C form rather than the standard IR 330.

CAE covers casual agricultural workers employed on a day-to-day basis for seasonal work of up to three months.

If none of the standard codes fit, you can apply to the IRD for a tailored tax code, which sets a custom withholding rate based on your specific circumstances.

How NZ's Progressive Tax Brackets Work

New Zealand taxes personal income progressively. Each portion of your income is taxed at the rate for the bracket it falls within, not at a single flat rate on everything you earn. Your tax code exists to translate this graduated system into a practical withholding amount your employer can deduct each pay cycle. The brackets for the 2026/27 tax year (from 1 April 2026) are:

• Up to $15,600: 10.5%
• $15,601 to $53,500: 17.5%
• $53,501 to $78,100: 30%
• $78,101 to $180,000: 33%
• Over $180,000: 39%

Your marginal rate is the tax on your last dollar earned. Your effective rate is your total tax divided by your total income, and it is always lower than your marginal rate. Take someone earning $60,000:

• First $15,600 at 10.5% = $1,638.00
• $15,601 to $53,500 at 17.5% = $6,632.50
• $53,501 to $60,000 at 30% = $1,950.00
• Total income tax: $10,220.50

The marginal rate is 30%, but the effective rate is 17.0%. An extra $1,000 at this level would be taxed at 30 cents in the dollar, not 17. A pay rise always puts more money in your pocket; only the portion above the threshold is taxed at the higher rate.

What Else Comes Out of Your Pay

Income tax is not the only deduction. Two other items reduce your take-home pay:

• ‍ACC earner's levy. For the 2026/27 tax year the rate is $1.75 per $100 of gross earnings (GST-inclusive), up to a maximum of $156,641 in liable earnings. This funds New Zealand's no-fault accident compensation scheme. On a $60,000 salary, the ACC levy adds roughly $1,050 per year.‍
• KiwiSaver Scheme contributions. From 1 April 2026, the default employee and employer contribution rate increased to 3.5% of gross pay (up from 3%). At $60,000, the employee contribution adds $2,100 annually. You can apply through the IRD for a temporary reduction back to 3% for between three and twelve months if the increase creates affordability pressure.
• Between PAYE, the ACC levy, and a 3.5% KiwiSaver Scheme contribution, an employee on $60,000 takes home roughly $46,630 per year. The headline income tax rate of 17% understates the real picture considerably.

Every payslip already shows you how much value you can consistently commit each month. If you can afford the level of compulsory deduction above, it can be useful to think about how much of your remaining income you might also want to direct toward your own long-term goals.

With that in mind, if you would like a sounding board on how your cash flow fits into your broader picture, you are welcome to book a complimentary initial consultation with our team.

Bracket Creep

Bracket creep is the process by which inflation pushes incomes into higher tax brackets without any real increase in purchasing power. New Zealand's thresholds were last adjusted in July 2024, the first move since 2010, covering roughly a quarter of the cumulative inflation over those 14 years.

Chief Forecaster at Infometrics Gareth Kiernan puts it plainly:

"One might argue that the tax take was too low when the current rates were set in 2010/11, but the fact that everybody is paying a higher proportion of their income in tax due to inflation and bracket creep over the last decade can't be ignored."

If your pay has kept pace with inflation since 2010, your effective tax rate is almost certainly higher now, which is one reason reviewing your tax code and financial settings each year is worthwhile.

Common Tax Code Mistakes and How to Avoid Them

Guessing instead of checking. The IRD's online questionnaire takes a few minutes. The cost of being wrong is a bill at year-end, or months of overpayment you could have put to better use.

Ignoring the student loan suffix. Omitting "SL" from your code does not waive your repayment obligation. The amount owed simply accumulates and arrives as a lump sum later.

Wrong secondary code. Your secondary code must reflect total income from all sources, not the amount from the second job alone. If you are unsure, the IRD's online tool will confirm the correct code in a few minutes.

Overlooking the ME code. If you earn between $24,000 and $70,000 and do not receive a main benefit, Working for Families, or NZ Super, you may be eligible for the IETC. The $520 annual credit is modest, but leaving it unclaimed year after year adds up.

Forgetting life changes. Reaching NZ Superannuation age, paying off a student loan, or picking up a second income source all warrant a code review. Your employer applies whatever code you last gave them.

How Your Tax Code Connects to Building Wealth

Your tax code determines your take-home pay, and your take-home pay determines what you can save and invest. KiwiSaver Scheme contributions are calculated on gross income but come out of net pay, so an incorrect code can tighten cash flow and make contributions harder to sustain. Beyond KiwiSaver, understanding your effective tax rate helps you evaluate tax-efficient investment structures where returns may be taxed at lower rates than your personal income.

NZ Income Tax Codes and Rates

Your tax code is a small administrative task with a real financial impact. Getting it right means more of your income reaches your bank account on time. Check the IRD's online tool if you are unsure, and make sure you are not leaving credits like the IETC unclaimed.

If you are looking to make your income work harder beyond paying the right amount of tax, get in touch to book a complimentary consultation.